Posted by: mel | November 24, 2009

Industry sales losses may reach $256m

Jakarta Post | Mustaqim Adamrah , Jakarta |  Business | 24 November 2009

The steel pipe industry may suffer losses of up to US$256 million by the end of this year as its total sales may plunge by 40 percent from last year, the Indonesia Iron and Steel Industry Association (IISIA) said.

IISIA head of steel pipe cluster Untung Yusuf said Monday as many as 14 pipe steel manufacturers had reduced production capacity by between 35 percent and 40 percent since early this year and might continue doing so until the year’s end.

The industry produced around 400,000 tons of steel pipes last year, he said.

“This year, steel pipe production may be cut by up to 40 percent, or by around 160,000 tons, of the amount realized last year,” he said.

The drop in production, Untung said, was a result of the global economic downturn, which has weakened global demand, including for domestic infrastructure, oil and gas piping and construction work.

He said global steel pipe prices averaged $1,600 a ton last year, while refusing to disclose this year’s prices as they were “confidential” fearing market volatility.

If steel pipes sold for $1,600 a ton this year, the industry could lose $256 million this year due to a production drop of 160,000 tons.

In addition to shrinking demand, which has resulted in a drop in production, the industry is also facing underpriced Chinese steel pipes flooding the domestic market, according to Untung.

He said Chinese steel pipes were priced “almost the same as prices of HRC (hot-rolled coil) produced by state steelmaker PT Krakatau Steel”.

He, again, refused to disclose prices of HRC — the raw material of steel pipe production.

According to IISIA data, HRC sold for between $1,200 and $1,250 a ton last year.

Global HRC prices stood at $630 a ton in August, $585 a ton in September and $540 a ton in October this year, according to www.mesteel.com.

“In efficiency terms, the value of domestic steel pipes is equal to Chinese [steel pipes],” said Untung.

“But the Chinese government provides [their steelmakers] with tax incentives. [That’s why] their steel pipes can enter [Indonesia] at cheaper prices.”

He, however, refused to disclose prices of Chinese steel pipes entering the Indonesian market.

According to the Central Statistics Agency (BPS), imports of iron and steel declined from $6.64 billion in the January-September period last year to $2.73 billion in the corresponding period this year.

Imports of iron and steel products stood at $2.09 billion in the first nine months this year, down from $2.4 billion booked in the same period last year, the BPS data says.

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